Webinars

We know a few things about the future: that it will come, and that it will probably not be exactly what we expect. In order to minimize the number of these future “surprises”, we counsel associations to prepare for the expenses that are predictable. Expenses that can be anticipated fall into two categories: the Operating Budget (for daily/weekly/monthly expenses), and the Reserve Budget (for large expenses that occur annually or less frequently). The larger expenditures, and thus the larger opportunities for failure, fall into the realm of the Reserve budget.

How often is “proper” or “prudent” Reserve planning? With Reserve contributions making up 15% to 40% of the typical Community Association’s budget, this is an important question. So let’s look at the issues…

Reserve contributions allow you to offset ongoing deterioration with appropriately sized Reserve contributions. The more deterioration there has been, the larger the association’s financial assets should be.

Our country is in the middle of an economic downturn fueled by excessive optimism. Too many Americans borrowed money for a home, driving up prices, with little or no margin to handle mortgage payments. They were sure that their income would remain stable, and they were sure that the home would increase in value enough that they could refinance if things got tough. Well, things got tough, but not the way anyone expected.

Duty of Care. Community association boards must give the business of their associations the same degree of care and diligence that prudent persons would exercise in their own affairs in similar circumstances. The duty of care requires directors to invest time and attention in association business, make reasonable inquiry into association matters to enable informed decision-making, and take reasonable, not arbitrary or capricious, actions.

We were recently doing a site inspection for a luxury mountain timeshare. It was relatively new, and the engineer had plenty of tales of the “kinks” that he had to work out to get the facility running smoothly. The story of the garage goes like this:

Our interactions with the “real people” in this industry are always interesting and often entertaining. On what might be considered a “normal” site inspection, there is often something humorous or fascinating that happens if you just pay attention. In the last month, I came home several times with a smile and a story. Here’s a recent anecdote: